ECONOMIC SURVEY SUMMARY 2019 - VOLUME I & II Table of Contents VOLUME - I _____________________________________________________________________ 2 CHAPTER 1: SHIFTING GEARS: PRIVATE INVESTMENT AS THE KEY DRIVER OF GROWTH, JOBS, EXPORTS AND DEMAND __________________________________________________________ 2 CHAPTER 2: POLICY FOR HOMO SAPIENS, NOT HOMO ECONOMICUS: LEVERAGING THE BEHAVIOURAL ECONOMICS OF "NUDGE" ____________________________________________ 4 CHAPTER 3: NOURISHING DWARFS TO BECOME GIANTS: REORIENTING POLICIES FOR MSME GROWTH ______________________________________________________________________ 9 CHAPTER 4: DATA "OF THE PEOPLE, BY THE PEOPLE, FOR THE PEOPLE" ___________________ 12 CHAPTER 5: ENDING MATSYANYAYA: HOW TO RAMP UP CAPACITY IN THE LOWER JUDICIARY 15 CHAPTER 6: HOW DOES POLICY UNCERTAINTY AFFECT INVESTMENT? ____________________ 17 CHAPTER 7: INDIA'S DEMOGRAPHY AT 2040: PLANNING PUBLIC GOOD PROVISION FOR THE 21ST CENTURY _____________________________________________________________________ 19 CHAPTER 8: FROM SWACHH BHARAT TO SUNDAR BHARAT VIA SWASTH BHARAT: AN ANALYSIS OF THE SWACHH BHARAT MISSION ________________________________________________ 22 CHAPTER 9: ENABLING INCLUSIVE GROWTH THROUGH AFFORDABLE, RELIABLE AND SUSTAINABLE ENERGY ___________________________________________________________ 25 CHAPTER 10: EFFECTIVE USE OF TECHNOLOGY FOR WELFARE SCHEMES- CASE OF MGNREGS __ 29 CHAPTER 11: REDESIGNING A MINIMUM WAGE SYSTEM IN INDIA FOR INCLUSIVE GROWTH __ 32 VOLUME – II ___________________________________________________________________ 35 CHAPTER 1: STATE OF THE ECONOMY IN 2018-19: A MACRO VIEW _______________________ 35 CHAPTER 2: REVIEW OF FISCAL DEVELOPMENTS ______________________________________ 37 CHAPTER 3: MONETARY MANAGEMENT AND FINANCIAL INTERMEDIATION _______________ 40 CHAPTER 4: PRICES AND INFLATION ________________________________________________ 43 CHAPTER 5: SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE _______________________ 46 CHAPTER 6: EXTERNAL SECTOR ____________________________________________________ 52 CHAPTER 7: AGRICULTURE AND FOOD MANAGEMENT ________________________________ 57 CHAPTER 8: INDUSTRY AND INFRASTRUCTURE _______________________________________ 62 CHAPTER 9: SERVICES SECTOR ____________________________________________________ 68 CHAPTER 10: SOCIAL INFRASTRUCTURE, EMPLOYMENT AND HUMAN DEVELOPMENT _______ 71 Copyright © by Vision IAS All rights are reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of Vision IAS. 1 DELHI | JAIPUR | PUNE | HYDERABAD | AHMEDABAD | LUCKNOW 8468022022, 9019066066 VOLUME - I CHAPTER 1: SHIFTING GEARS: PRIVATE INVESTMENT AS THE KEY DRIVER OF GROWTH, JOBS, EXPORTS AND DEMAND Introduction Last Five Years: The Accomplishments The chapter gives an overview of the • Macroeconomic Stability- accomplishments of the Indian economy in the o Growth- India became the sixth largest last five years and presents a blueprint to economy due to sustained growth rates higher achieve the goal of five trillion economy in the than China. India grew at 7.5% against the world next five years. In doing so, the Survey tries to go growth of 3.6%. o beyond the traditional models of economy. Inflation- Following the formation of Monetary Policy Committee (MPC), inflation has remained The Next Five Years: A Blueprint for Growth within the mandated band of 4%. and Jobs o Fiscal Management- the gross fiscal deficit (GFD) to GDP ratio declined from 4.5% (2013-14) to • With strong economic foundations laid over 3.4% (2018-19), following the broad mandate of the last five years, the Survey advocates Fiscal Responsibility and Budget Management that, in order to achieve US$5 trillion (FRBM) Act, 2003. economy by 2024-25, India needs to sustain o Apart from it average inflation, the fiscal deficit, a real GDP growth rate of 8%. the current account deficit (CAD) remained • To achieve this, the survey prescribes the within manageable levels and foreign exchange blueprint of a virtuous cycle of savings, reserves rose to all-time highs. • Beneficiary focus and targeted delivery- to ensure investment and exports catalysed and the benefits of growth reach the bottom of the socio- supported by a favourable demographic economic ladder. It was achieved through a JAM (Jan phase. Dhan, Aadhaar, Mobile) trinity and 370 major cash- • In this blueprint, the Investment, especially based schemes were implemented under the Direct private investment, is the “key driver” that Benefit Transfer mechanism. drives demand, creates capacity, increases • Accelerated creation of physical infrastructure- in labour productivity, introduces new areas of electricity, national highways, bridges, technology, allows creative destruction and aviation sector among others, such as generates jobs. • Strengthened the mechanisms of federalism- • To support this blueprint, the Survey has through the Niti Aayog, the Goods and Services Tax and involvement of states in a friendly competition to examined various countries such as China improve their Key Performance Indicators (KPIs). and East Asian countries, whose high • Corporate Exits- has been eased by the introduction growth rates were sustained by a growth of the Insolvency and Bankruptcy Code (IBC), 2016, model driven by such a virtuous cycle and a which has allowed the recovery of large sums by favourable demographic phase. creditors from resolution or liquidation. Going beyond the Economics Of ʻEquilibriumʼ in the Blueprint Role of other different factors in the virtuous cycle • Savings- are crucial for more investment, which • The blueprint starts with the philosophy that in turn create more savings through generation economies are intricately interwoven systems. of resources. Thus, it dumps two assumptions which were • Jobs- The survey uses Chinese experience to taken in the traditional economics- illustrate how countries with highest investment o Economic Equilibrium- which assumes that rates also create most jobs. • the economy is in balance until an outside Exports- creates additional demand for the large capacities created by high investments in the shock upsets it, and thus it follows a linear economy. Apart from it, they are crucial as system. This view has been challenged higher savings preclude domestic consumption increasingly following the Global Financial as the driver of final demand. Crisis. 2 8468022022, 9019066066 DELHI | JAIPUR | PUNE | HYDERABAD | AHMEDABAD | LUCKNOW o Economy functions in silos- which assumes that other social and institutional features and their developments in the country do not impact it. Thus, it attempts to solve job creation, demand, exports, and economic growth as separate problems. • As these macro-economic phenomena exhibit significant complementarities, the Survey postulates the centrality of the triggering macro-economic variable (i.e. investment) that catalyses the economy into a virtuous cycle. • Hence, going beyond the traditional approach, the blueprint has been designed with a thought that an economy is in a constant state of dis-equilibrium. So, it requires both- a general strategy (blueprint of virtuous cycle) as well as the flexibility and willingness to continuously recalibrate tactics in response to unanticipated situations. • These tactics have been discussed in details in various chapters of the Survey, which can help drive investments and to navigate this world of constant dis-equilibrium. These are- o Behavioural Economics- which can be integrated into policymaking to foster productivity and achieve desired outcomes. Here, the survey has analysed the successful behavioural change effected by the schemes like Swachh Bharat Mission and other measures taken by government to understand the psychology of people. o Data as a public good- Here the framework for creation of data as a public good has been discussed, which can be utilized by the governments to enhance ease of living for citizens, enable truly evidence-based policy, improve targeting in welfare schemes, uncover unmet needs, integrate fragmented markets, bring greater accountability in public services etc. Given that sophisticated technologies exist, such framework can be created within the legal framework of data privacy. o Improving Legal systems and Contract Enforcement- which is currently weak in India due to large pendency of cases. The World Bank’s latest Ease of Doing Business Report ranked India at 163 for contract enforcement. Since, we live in a world of “butterfly effects” and unintended consequences, improving legal system is the best investment, which Indian reforms can make. The survey suggests the use of technology, increase in working days and administrative reforms to achieve legal sector reforms. o Consistency in Economic Policymaking- Here the survey examines the policy uncertainty in India and its impact on investment. The survey suggests that there should be predictability of policies, under the overall coherence of vision and strategy adopted by the government. o Role of demographics- as India will remain in the ‘demographic dividend’ zone for over two decades. The survey analyses that savings are primarily driven by demographics and income growth. For this it recommends that policymakers should reduce the cost of capital and real interest rates, which can foster the virtuous cycle of investment, growth, exports and jobs. o Role of job creation and earnings- Here